Barcode & RFID Convergence: Enabling Greater Visibility Through Standards

Prepared for GS1/EPC Global US

AutoID & Transaction Automation PracticeTom Wimmer, Practice DirectorDrew Nathanson, Director of Research Operations

VDC Research Webcast

Barcode & RFID Convergence: Enabling Greater Visibility Through Standards

Frequently Asked Questions

Can I get the slides from this presentation?

YES

Is this webcast being recorded?

YES

Can I ask a question?

YES

2 – 2010 VDC Research Group, Inc.AutoID & Transaction Automation Practice

VDC Research

Copy of webcast, white paper and complimentary insights and data on the RFID & Barcode market available at:

http://vdcresearch.com/market_research/autoid/research_reports.aspx

Audio and copy of webcast and white paper available at:

http://www.gs1us.org/epcglobal_us/education


http://vdcresearch.com/market_research/autoid/research_reports.aspx

http://www.gs1us.org/epcglobal_us/education

Agenda

• Overview & Definitions

• What’s Converging?

• Why Convergence?

• Where is Convergence Happening?

• EPC – Enabling Convergence

• Expectations


Barcodes or RFID??


It’s not an either or proposition

It’s a More Harmonious Story!Working together, the two support existing requirements while providing added benefits


Key Descriptions

• What is Convergence? Convergence refers to previously separate technologies and solutions that now share resources and interact with each other synergistically, creating new efficiencies and additional value.

• What is Automatic Identification and Data Capture (AIDC)? AIDC is the non-manual identification, collection and routing of information about an object.

• What is Barcode and RFID? Barcode: An optical, machine readable representation of data that can be used to show

information for a specific object. RFID: A wireless, machine readable piece of memory that can be used to gather, store

and show data for a specific object.

• What is the Electronic Product Code (EPC™)? An RFID-friendly encoding scheme that represents the same GS1 identifiers used with

U.P.C. barcodes for the identification of a specific instance or a type of trade item or asset. Provides a bridge between legacy AIDC systems and new solutions and is supported by a

suite of globally accepted technical standards. Ensures items are identified and data is captured and shared in a common way that can be

understood by all value chain participants.


Types of AIDC Technologies

Electro-Magnetic RFScan-based

Image Capture

Satellite

PRINTED

Stacked Linear DataBar

Optical Character

Recognition(OCR)

Mag Stripe

1D Barcodes EAN-8 UPC-A EAN-13 ITF-14 GS1-128

2D Barcodes Datamatrix QR Code MaxiCode Microsoft HCCB MIT Bokode

Passive RFID Low Frequency High Frequency Ultrahigh Frequency

Active RFID UHF Ultra Wideband WiFi ZigBee

ENCODED

Contact

Memory

Buttons

GPS

Encoded: information is encoded on silicon memory which is intregrated into a device.

Printed: information is coded via symbology which is printed, or engraved on a label, or substrate.


AIDC has Architectures with Commonality

BARCODE COMMON COMPONENTS RFID

• 1D Barcodes• 2D Barcodes• Laser• Imaging

Symbols or Data Carriers

• Low Frequency• High Frequency• Ultra High Frequency• Microwave

• Scanners & Imagers• Printers• Direct Part Marking

Devices for reading / writing

• Readers / Interrogators• Printers / Encoders

Middleware/Edgeware Interface for devices and host

Middleware/Edgeware

Regardless of the technology, every AIDC system has common components


What’s Converging?

• Technologies are being integrated with each other because the end user wants to leverage the information and attain the benefits from each independent system.

• Gathering and sharing information from independent systems can be attained by creating consistency within common architectures.

• This consistency can be accomplished by developing a single, unifying platform that will ensure that the information being used is essentially the same … a standard.

• Although technologies continue to be integrated with each other and leverage a diversity of carriers, the real convergence is occurring at the data level.

• Convergence is not about technology, its about commonality.

The real convergence is happening at the data level


GS1 US Visibility Framework


Converging AIDC Technologies

Barcode

RFID

NFCSensing

DAQMag Stripe

M2MOCR

Biometrics

Barcode 34% 1% 7% 0% 22% 22% 8% 5%

RFID 60% 5% 14% 1% 1% 17% 2% 1%

NFC 21% 11% 4% 0% 14% 46% 4% 0%

Sensing 0% 63% 0% 27% 0% 7% 0% 3%

DAQ 0% 5% 0% 59% 0% 27% 9% 0%

Mag Stripe 97% 0% 0% 0% 0% 0% 0% 3%

M2M 12% 28% 11% 15% 19% 0% 6% 9%

OCR 7% 13% 7% 0% 33% 0% 40% 0%

Biometrics 11% 28% 11% 33% 0% 0% 17% 0%

Respondent Converged / Converging AIDC Solutions

(N = 217)

Survey of AIDC users indicates a diversity of converged / converging AIDC solutions


Why Convergence?

• Information stored on a barcode typically pertains to what the product is, where it came from and the date it was made or received. The same information is usually stored on an RFID chip; however, RFID also affords the opportunity to collect, append and store more information.

• Why Both? Desire to leverage both streams of business intelligence to ensure greater visibility, enhance decision making

and obtain operational efficiencies RFID is better suited to meet the increasingly complex and constantly changing end user requirements;

however, barcode is deeply entrenched in the heart of operations of most enterprises. A full conversion to RFID would be costly, incur downtime and most likely LIMIT information throughout the value chain (since it wouldn’t be supported by all participants)

The two technologies working together can not only support existing requirements, but they also:• Enables support for either technology within the value chain as well as provide an additional layer of redundancy and visibility.

• Provide the ability to enhance and add functionality to the systems with minimal invasiveness.

• Establish a migration path to a more advanced solution in which the end user has more control over pace and CAPEX.

• One solution is the proverbial standard, the other offers the same and more, but in order to get the ‘more’, the two have to work together as the same.

• In order for the two technologies to be able to work together, they need a common platform that will not only ensure the intelligence gathered from each solution is related to the same product / product types, but is also able to support the rapid addition of other technologies and their data.

Two technologies working together to provide the most value to the end-user


Convergence Drivers & Pains

Other

Unable to fully-convert /upgrade system

Require AIDC data commonalities

Enhance analysis/decision-making

Need to share data throughout/across value chain

Operational efficiencies

Need to support multiple technologies

Provide greater visibility and/or functionality

0% 50% 100%

Convergence Drivers(Percent of Respondents)

(N=194)

Other

Additional design/consultation

Downtime due to integration

Integration with host

Time required to integrate

Integration with common data format/platform

Integration costs

0% 20% 40%

‘Pains’ of Convergence(Percent of Respondents)

(N=194)


Transportation

Government

CPG

Retail

Commercial Services

Automotive

Healthcare

Electronics

Pharmaceuticals

Animal Tracking X X X

Asset Tracking X X X X X X X

AVI X X

Baggage Handling X X

Document Tracking X X X X X

Inventory Control X X X X X X X X X

Sensing/Monitoring X X X X X

Shop-floor Automation X X X X X X

Supply Chain Management

X X X X X X X X X

Ticketing X X X

WIP X X X X X X X

• Convergence of AIDC solutions is occurring within nearly every region, vertical and facet of the value chain – from the point of manufacture through the point of sale.

• For the current RFID and Barcode industry, convergence is … Highly concentrated in government,

manufacturing, transportation and retail. Primarily in support of shop-floor automation,

supply chain management, asset tracking and inventory control.

Rapidly expanding to other verticals and applications as EPC Gen2 adoption broadens in both brown and green field markets andmore hybrid products become available.

Where Convergence is HappeningConverged barcode and RFID solutions are more common than most expect


Converged RFID & Barcode Solutions

Vertical ApplicationAverage % Converged

Tags

Retail


84%

Asset Tracking 23%

Inventory Control 92%

Manufacturing


68%

Shop-floor Automation 39%

Asset Tracking 19%


Transportation


78%

Asset Tracking 24%


• Convergence of barcode and RFID requires a more robust hardware solution that can support both technologies – even though both are not used at every point within the value chain.

• Product examples include: Transponders

• RFID tag embedded between barcoded paper stock and adhesive backing OR RFID hard tags with a printed or marked barcode on housing

• Suppliers: Avery Dennison, Alien, Raflatac

Readers• RF enabled stationary or mobile devices with

integrated barcode scan engine

• Suppliers: Motorola, Intermec

Printers• RF enabled thermal barcode printers

• Suppliers: Zebra, Printronix, Sato

Continued convergence as adoption broadens

End-User Estimated % of Converged Tags Use by Vertical & Application

(N = 145)


Real World Examples

Vertical Market

Company Type

Converged Solutions

Description of Converged Solution Benefits Attained

Transportation 3rd Party Logistics Provider

• Barcodes (1D, 2D)• Passive RFID• Active RFID• Data loggers• GPS

Accept barcoded or RFID tagged product from customer. Tagged product is placed in shipping containers or pallets that are equipped with Active UHF RFID. These containers or pallets are then stored in warehouse/placed on transport equipped with temperature data loggers and GPS. All systems communicate with host and real-time information can be sent directly to the field worker and their management team

• Average delivery time decreased by ~10%, not as a result of faster routes, but due to improved tracking and management of assets/employees

• Expanded portfolio of services to provide more visibility and value to customers

• Near real-time information, enhanced data analysis and more effective notification systems

Manufacturing Automotive Assembly

• Barcodes (1D, 2D)• Active RFID• Direct Part Marks• DAQ Terminals• Equipment

Barcodes and Direct part markings are placed on components prior to entering shop-floor and are tracked and grouped together as product is assembled. Additional information pertaining to assembly is gathered from the data acquisition terminals as it moves from station-to-station and is QA/QC’d. Final part/assembly is affixed with Active MW transponder for tracking in facility and distribution to customers

• Significantly enhanced accountability in value chain, which in turn enabled a higher quality product

• Improved visibility of assembly processes, custom orders and time-on-task

• Decreased time-on-task and turn around/delivery times by more than 20%

• Increased asset utilization and equipment maintenance

Retail Brand Name Fashion

• Barcodes (1D, 2D)• Passive RFID

Hang tags, equipped with RFID and barcodes, are affixed to individual clothing and luxury goods in the distribution center where it is catalogued and held until needed. Upon entering the store, the products are warehoused or placed directly on the floor/shelves. The solution also provides in-store inventory management, where the intelligence is ported to the host system in real-time and is directly linked to the purchasing systems

• Extended visibility of AIDC system to provide more item-level intelligence

• Decreased out-of-stock by more than 22%• Reduced inventory-related labor costs by

nearly 73%• Automated and Improved several

purchasing and operational processes• Enabled reallocation of store personnel to

provide more customer-facing services


EPC – Bringing it all Together

• The foundation of success of an AIDC systems depends on well-defined standards as much as it does the technology. Standards are the foundation for clear, understandable exchanges between companies in an increasingly globalized economy. Without them … business processes would be highly complex and less automated.

• The role of a standard increases as new/alternative means to capture and convey information are developed as is the case with barcode and RFID.

• The standard behind convergence in barcode and RFID is the Electronic Product Code (EPC). One of the fastest growing markets in RFID, EPC is expected to account for nearly $790 million in

2010, approaching $3 Billion within 5 years (~40% CAGR). On average, the EPC RFID end-user is more committed to the technology and typically has a larger

RFID budget. EPC continues to exhibit some of the highest innovation levels in the industry, as well as some of the

fastest price erosion rates. Most EPC revenue is from supply chain management applications and is concentrated (nearly 80% of total

global revenues) in a small number of larger Tier I and II firms that are tagging a limited number of SKUs … there’s tremendous opportunity in both existing and new accounts, as well as new markets and applications.


Benefits from those Using EPC

Other

Decreased investment/more effective capital utilization

Facilitates globalization

Increased control over migration

Increased capacity to support more systems -internal and external

Improved ROI

Creates operational/process efficiencies

Reduced integration time

Enhanced ability to add functionality and technology/futureproofing

Standardized/more consistent data

0.0% 25.0% 50.0%

Benefits From EPC(Percent of Respondents)

(N=173)

<10% 10-15%

15-20%

20-25%

25-30%

30-35%

35-40%

>40%0%

5%

10%

15%

20%

25%

Reduction in Integration Time Associated with EPC

(Percent of Respondents)(N=87)


Not Just for Supply Chain Anymore

• Automatic Vehicle Identification

• Asset Management

• Baggage Handling

• Shop-floor Automation

• Library

• Rental-item Tracking

• Hospitality (i.e.: tracking linens)

Emerging EPC RFID applications


Conclusions

• Convergence enables companies to extract value from multiple technologies and systems, and a common architecture enables them to do this in an efficient and effective manner. A common architecture enables convergence, and for barcode and RFID, that common architecture is the EPC, supported by the GS1 US visibility framework.

• Expectations As adoption of RFID increases, it will continue to converge with barcode and other AIDC solutions as

companies look for ways to extend value and increase visibility, thus making the role of common architectures such as EPC more critical to a company’s ability to gather, leverage and share information.

There will be an increased need to provide commonality for information being shared across value chains, regions, industries, companies and applications. There really is no such thing as a ‘pure’ supply chain anymore (i.e.: sources, systems, technologies) and value chain and system crossover is a necessity of doing business in our current and future global society.

As AIDC technology development continues, it is expected that solutions will be created that will offer increased visibility and the ability to capture more information.

The ability to easily leverage and port information from multiple systems – in real-time – will open up the floodgates for analytics, dashboards and real-time alerting, driving the decision making processes down as low as it can possibly be driven.

Innovation and adoption of new technologies and systems to attain these efficiencies is anticipated to continue. AIDC technology is increasingly being built for standardization and extensibility as a way to simplify integration and meet future market demands for commonality and flexibility.


EPC: a cornerstone for today … and tomorrow

About VDC Research Group

VDC Research Group (VDC) provides exceptionally detailed direct-contact primary market research and consulting services to many of the world's largest technology suppliers, innovative start-ups and leading investors. The firm is organized around six practices, each with its own focused area of coverage. Our clients rely on us for highly segmented research and analysis which is derived from our unwavering commitment to the idea that all markets are collections of smaller market segments and that winning companies must develop and execute strategies that are segment-specific.

Please visit our website at www.vdcresearch.com to learn more, or call: 508.653.9000


http://www.vdcresearch.com/

Ways to Work With Us

This report is one of many ways VDC Research Group can help you better navigate your market and grow your business. In addition to published research, VDC Research Group offers a range of services designed to meet your specific tactical and strategic decision-support needs.

Retained Services – VDC Retained Services provide clients with ongoing access to our research staff for a predetermined fee. By entering into a Retained Services Agreement, VDC will commit resources to you and your team each month, but the specific research, analyses and advisory work we undertake for you can be decided by you on an as-you-go basis. Clients in particularly dynamic markets derive significant benefits from the ability to obtain up-to-the minute insights and guidance from our research and consulting teams.

Custom Research & Consulting Service – VDC’s Custom Research and Consulting Services provide clients with the insights and guidance they need to make significant business decisions with confidence in the midst of an uncertain future and complex markets. To date, more than a thousand clients have benefited from our research-driven guidance and exceptionally close client collaboration. Our unique approach ensures that all of our assistance and recommendations are based upon rigorous analysis of information gathered by VDC directly from the marketplace. By engaging VDC when faced with important market strategy decisions, clients maximize the likelihood of achieving their specific goals, including growing revenue, increasing margin, successfully expanding into new markets, or improving the performance of the channel.

VDC is prepared to assist your organization with any of the strategic and tactical initiatives described below : Market Expansion – Into new verticals, applications, account sizes, or geography. Feature Set Definition – For product upgrades, new product lines, product line extensions. Technology Strategy – Including standards adoption, open-source strategy, Service Oriented Architecture (SOA) business model migration. Distribution Strategy – New channel development, channel strategy, channel performance audit. Customer Satisfaction & Loyalty – Existing customers, defections, sales loss analysis. Strategic Acquisition – Of a peer, new entrant, intellectual property.


Ways to Work With Us – continued

On-Site Meeting Participation – When making significant decisions, VDC’s analysts and consultants can be extremely valuable participants in your internal process. Our participation in team meetings allows you to add the unique insights of a full-time market expert to your process, ensuring that you are acting on objective third-party market intelligence instead of the potentially biased perspectives and groupthink that exist in most organizations. When meeting to plan new products, to plan your entrance into new markets, to build a business case for your board, to address challenges with your existing market strategy, and for a wide variety of other market-related issue sets, we encourage you to consider the participation of a VDC analyst or consultant.

Speeches & Presentation – Important events such as reseller conferences, partner conferences, product launches and related teleconferences and Webinars gain credibility from the participation of one of our analysts or consulting professionals. Our speakers enhance your event by providing your attendees with unique market insights and intelligence that will leave them better informed about your markets and better prepared to support your business objectives. Our professionals can also provide additional credibility to your strategy by presenting to your audience fact-based research that supports your planning.

Executive On-Boarding Briefings – If you or someone on your team is new to their position, the company or the industry, VDC can radically accelerate their pace of learning so that they can deliver results much more quickly than they could otherwise. VDC is an expert at providing senior leaders with high-impact industry history briefings, market status briefings, competitive positioning briefings and much more. Our professionals can help new leaders make the novice-to-expert transition in record time.


Notice of Copyright 2010 VDC Research Group, Inc.

The entire contents of Barcode & RFID Convergence: Enabling Greater Visibility Through Standards are proprietary to VDC Research Group, Inc. (VDC) and may not be distributed in either original or reproduced form to anyone outside the client’s internal organization within five (5) years of the report date without prior written permission of VDC.

VDC has devoted its best efforts to obtain for and provide to its clients as accurate data as is possible. Nevertheless, we cannot be held responsible for incorrect information provided to us by vendors, users, or others that we interview. Nor can we be held responsible for forecasts of the future evolution of an industry, which, in retrospect, proves inaccurate. Our goal is to provide the best possible analysis of an industry, utilizing data obtained through a time-proven and rigorous research methodology, for our clients to employ in developing strategies to compete in an uncertain and ever-changing business environment.

TRADEMARK ACKNOWLEDGEMENT: Many names of companies, associations, technologies, products and product types, etc. mentioned in this report comprise Trademarks, either registered or non-registered, owned by various entities. These are too numerous to mention individually. VDC acknowledges that ownership of these Trademarks exist and requests that readers acknowledge this as well.


Business

Barcode & RFID Convergence: Enabling Greater Visibility Through Standards